In 2002, while Lord Browne was CEO, BP prepared a document entitled “Cost benefit analysis of three little pigs.” This was in fact a cost-benefit analysis of how much a human life was worth compared to the cost of building blast-resistant buildings to put them in. A human life was worth £10 million:

The flippant report reads, in part: “Frequency — the big bad wolf blows with a frequency of once per piggy lifetime. Consequence — if the wolf blows down the house then the piggy is gobbled. Maximum justifiable spend (MJS) — a piggy considers its worth $1,000 to save its bacon. Which type of house should the piggy build?” The options listed range from a house built of straw to a blast-resistant house and the calculation placed a value of $10 million on each human life potentially lost.

Incidentally, BP chose one of the lower-cost options, one 10 times cheaper than the blast-resistant structures. Outzen notes that all of the fatalities in the Texas City blast “occurred in or around the nine contractor trailers.”

It should be made clear that we are not concerned on this website about the question of whether Lord Browne himself is a good or ‘moral’ person. The problem is much greater than that: he springs from an entire dominant system where the suffering of other people is considered unimportant compared to the business of making money. The very structure of corporations ensures minimum personal responsibility for those in charge, and maximum reward for taking risks – including risks with other people’s lives. The market system they operate in is constructed (by laws rather than ‘naturally’) to reward those who are most willing to do the kind of cost-benefit analysis performed by BP: more concerned with the company bottom line than with the true costs to people or society.

It is this system and the schools of thought that spring from it that are held up as ideals and that we are told should be emulated by government.

Good PR is of course another thing taught by this school of thought, which takes us neatly to the next topic…

138 Responses to “Lord Browne’s values”

“where the suffering of other people is considered unimportant compared to the business of making money” – I imagine that he would argue that they were in-fact considering the suffering of people. And that oil on balance decreases the suffering of people. The profit they make is just the incentive for the individual to do the work, make the investment, etc.

I do not think you are really addressing the core of the argument here.

This makes no sense. If you could spend £250,000 on your house to decrease the risk of fire from 0.1% to 0.09%, would you do it? No, nobody would. There’s nothing ‘corporate’ about that school of thought.

Do you understand the concept that tax money is not an infitinite resourse? That we have a £160bn deficit?

Do you really believe websites that tell you that £160 billion can magically be found in rich people’s pockets and they won’t notice the difference and nobody has to make any sacrifices? Its no wonder they provide a link to UNISON.

Also, that’s a bogus argument about the fire risk to a house, because there are certain preventative measures you would take out of a sense of duty to your family and so on – without doing the calculations about costs. Other things you might do the cost-benefit calculation on, but not everything, because some risks are too high, and human lives deserve more than a bogus cost-benefit analysis that can’t possibly take into account the value of a human life.

Other things you might do the cost-benefit calculation on, but not everything, because some risks are too high

No, what you are saying is that in some cases the cost is so low and the benefit so high – like a smoke alarm – that the calculation is very easy (although huge numbers of people can’t be bothered to check the battery once in a while, even when they are putting their family at risk). Its not that you don’t do a cost benefit analysis, its just that it is a very easy one. Other things, like installing a sprinkler system in your house, most people would conclude are not worth the cost.

bogus cost-benefit analysis that can’t possibly take into account the value of a human life

They quite obviously can, and everyone does it, even if they don’t spell it out in terms of numbers. If one car is 4% safer than another, would you pay £100 more, £1,000 more £10,000 more or £100,000 more for that safer car? Everyone makes these decisions, whether they are choosing a car, choosing a house, choosing an airline, picking a holiday, whatever.

Sneering at BP for having to make these decisions doesn’t mean the decisions don’t need to be made. It just means you don’t have the courage to make them.

They quite obviously can, and everyone does it, even if they don’t spell it out in terms of numbers.

Although that may be true, the examples you cite are very simple. Smoke alarm, single house. Safer car, single person. Sprinkler system, single house.

However, trying to apply the same cost benefit analysis to a much more complex situation can be very misleading. Some things are very hard to quantify (particularly population level risks, e.g. passive smoking), or have very high error rates. For example, if miss-value something by £1 over a population of 6 Billion, that is a lot of money.

I think, hope you would admit, that there is a very large scope for error in these kind of calculations.

No, we are profoundly worried about the consequences of the way this type of analysis is performed affects our lives. I am deeply concerned that in the next few years inadequate numbers of graduate students will be available in many subject areas.

Don’t bother doing any analysis, just guess?

No, I am not suggesting that. However the point being made is that they way Lord Browne does it has profound problems that I am suggesting we need to address. We need to make a different form of analysis. I specifically feel that allowing BP to both profit from and perform the safety analysis is bound to lead to a failure in that analysis. And the complexity of the analysis and subjectivity and difficulty in doing it make it very easy for BP to hide their manipulation.

Sneering at BP for having to make these decisions doesn’t mean the decisions don’t need to be made. It just means you don’t have the courage to make them.

Seeing it in terms of something so etherial a value as courage does not really get us anywhere. It is just seems to be an attempt at an insult.

I think you, obviously, are aware that BP is not a disinterested party to this calculation. If they estimate the value of the life or the risk lower, and/or the cost higher, then they can justify not spending the money. Which means more profit for them if the risk does not occur. And if they also can minimise compensation payments (or the compensation payments do not match a “realistic” – socially acceptable, and that is hard to define – value) then they are better off letting the person die and paying the less-than-social-value compensation.

BP are not making this calculation from courage or selflessness. They are making a serious amount of money from it.

I am not saying that the individuals involved would deliberately do the calculation misleadingly to benefit them (I am not making a moral judgement about them at all). But that a company which follows that approach would be more profitable so more likely to continue in business. So in the long term the general system of companies doing cost-benefit we have would be likely to tend towards undervaluing peoples’ safety.

To use economists language, it is a type of externality. And markets can allow otherwise unprofitable activities to be profitable by externalising some of the costs/risks. The actors in the market (the companies) have an incentive to externalise any cost or risk to the extent that they can.

This is of course often supposed to be offset by legislation/regulation. But that of course is never perfect, and BP is a very powerful organisation.

I agree that he is doing something like that. However, what I am trying to test out is if you have any suggestions for a practical and effective way for doing cost benefit analysis. Because if you do not, then your position “do an ineffective easily manipulated cost benefit analysis” is not practically different from Informant’s “do no/limited cost benefit analysis”.

I am saying that you have to gradually make systemic changes to the incentive structures of your society and the balance of power. Simply asking very powerful people to “please consider the little people in your analysis” is not going to prevent future cases like this. It is about power and force, so that relevant factors are included in the analysis.

So, I do not consider it a tangent. I consider it the core point (I think I do differ from Informant argument here, we are different people), how do you do this in practice not simply in theory. Fell free to ignore me whenever you see fit.

I don’t think this website is for general discussion of whatever subject comes to mind.

“[Browne] springs from an entire dominant school of thought where the suffering of other people is considered unimportant compared to the business of making money. It is this school of thought we are told should be emulated by government.”

Where does this statement come from? Did BP have a safety budget of zero? “We” are “told”? By who? When? This is all made up. That is my point.

The answers to the questions in that last post can all be found on this site, apart from BP’s safety budget, the size of which is not publicly known as far as we know, except that it was manifestly too small.

I’m sorry but no. “We are told the suffering of other people in considered unimportant and this should be emulated by government”. Well no, we aren’t told that and you haven’t shown anything like that here.

In fact we are told – by you – that BP would spend $10 million on safety to prevent the loss of one life. That is hardly “unimportant”.

The NHS (you know, that highly efficient government run institution run by people loving government workers, many of them reliably left wing and unionised, not like those evil corporations staffed by Tories and other gargoyles) – yes that NHS – well they looked into exactly the same issue and they concluded that drugs which cost more than £20,000 were probably not worth paying for.

So shocking stuff! It seems that government itself springs from a dominant school of thought where the suffering of other people is considered unimportant compared to the goal of saving money. It is this school of thought we are told should be emulated by universities… er whoops no that can’t be right. Can it?

There’s a slight difference between calculating the cost of how much one is willing to spend (or in this case, concede from the returns of your profit-making activity) on “risk-management” in a situation where you are *choosing* to undertake an activity vs attempting to calculate how to allocate finite resources to maximally serve the user base (however skewed that allocation might actually be in practice).

And from my reading of that little piggy article, BP actually settled on a figure of $1 million…although that’s a bit moot perhaps.

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In 2002, while Lord Browne was CEO, BP prepared a document entitled “Cost benefit analysis of three little pigs.” This was in fact a cost-benefit analysis of how much a human life was worth compared to the cost of building blast-resistant buildings to put them in. A human life was worth £10 million: The flippant […]